The original definition of a nudge by Thaler and Sunstein (2008) goes as follows:
“A nudge... is any aspect of the choice architecture that alters people’s behavior in a predictable way without... significantly changing their economic incentives.”
Or alternatively, this definition by Löfgren & Nordblom (2020):
“a nudge is an alteration of the inattentive choice situation, which would not affect the attentive choice.”
A nudge is more likely to be effective if the choice is not very important to the person – in other words, the consequences of getting the choice wrong are not meaningful to them in some way. Nudges are less likely to have any effect at all for choices that someone considers to be important, and other kinds of intervention should be considered (e.g. information, regulations or price).
The basic premise of the nudge approach is the concept of bounded rationality - that human beings are fallible, poorly informed as well as suffering from myopia, inertia and self-control issues. The heuristics and biases program (H&B) has uncovered a lot of systematic violations of reasoning and decision making which have led to a loose consensus that humans have innate cognitive limitations which lead us to instinctively rely on heuristics. However, it's not the only view on how humans behave and decide; something that is often missed in the conversations on the applied side of practitioners.
When to use nudges
These questions are helpful to ask when planning an intervention:
What factors could be causally relevant to the success of the intervention?
How could the intervention influence these factors?
What precautionary measures should be taken to avoid failure?
Behavioral economics research has been focused on the particular set of options that an individual decision maker faces without acknowledging or explicitly specifying the environment in which the choice architecture is embedded. One important point is that subgroups matter: depending on the situation they can result in the intervention not working at all, backfiring or resulting in unexpected side effects.
Many behavioral interventions are designed to target the largest number of people in one go as possible - after all, the promise of behavioral economics and nudging is that small changes can have big effects. This assumption of sufficient homogeneity of behavior and especially its underlying mechanisms has come at the expense of being sensitive to varying backgrounds, values and preferences.
Summary
Many nudges undoubtedly exert real and meaningful effects on behavior. But you won’t learn that – or which ones – by computing a bunch of averages, or adjusting those averages for publication bias. Instead, you have to read the studies and do some thinking.
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